Pilot Insights: How Stablecoins Have Transformed Aid Delivery

Mercy Corps Ventures
Mercy Corps Ventures
7 min readJan 28, 2025

To better deliver humanitarian aid during an ongoing conflict, Mercy Corps Ventures partnered with a Mercy Corps country team, a locally-founded startup, and four local organizations to pilot stablecoin transfers . For security reasons, the name of the country, region, partners, and service providers in this pilot have been anonymized.

In brief:

  • Cryptocurrencies for humanitarian aid demonstrated significant efficiency, cost-effectiveness, and security improvements compared to traditional methods.
  • Aid transfer times were reduced by 62% and resulted in cost savings of 10.8%, enabling aid agencies to reach 12% more users.
  • Key challenges exist around scalability, regulatory frameworks, and technological literacy. However, with refinement, the cryptocurrency solution could shave off significant time and cost for aid actors operating in complex financial landscapes.

Over the past decade, humanitarian crises have become more frequent and severe, spanning climate change-driven disasters, prolonged conflicts, and global pandemics. In the first half of 2024, the number of people in need of humanitarian assistance and protection increased by 7 million due to climate shocks. In the years ahead, conflicts, the effects of the climate crisis, and economic inequalities will continue to be the primary drivers of humanitarian needs. The communities and civil society groups that work to meet the most acute needs of people in crisis worldwide, fight tirelessly to maintain resilience and cohesion when confronted with violence and insecurity, which are further compounded by bureaucratic obstacles.

Humanitarian access in conflict zones is increasingly constrained by the physical threats posed by insecurity. In some cases, hostile parties deliberately and actively obstruct aid efforts, further exacerbating the crisis. Targeted attacks on aid workers and deliberate disruptions to essential services have taken a devastating toll, severely hindering humanitarians’ ability to reach people in desperate need.

The dangers associated with delivering humanitarian aid highlight the need for a corresponding evolution in the planning, execution, and sustainability of humanitarian aid operations. Central to this evolution is the adoption of a holistic approach that integrates advanced global technology with the power of local collaboration.

Photo courtesy of Mercy Corps

The Pilot

Over three months, we addressed challenges in humanitarian fund transfers in a conflict zone. Mercy Corps teams partnered with a locally-founded tech startup called Project Lydian to pilot the delivery of stablecoin-enabled grant payments to civil society groups and local NGO partners. The pilot demonstrated significant efficiency, cost-effectiveness, and security improvements compared to traditional methods. This paradigm shift in aid payments to civil society groups and local NGO partners demonstrates the potential of using cryptocurrency to enhance program impact and allow aid funds to reach recipients more quickly and securely.

The primary objectives of this pilot were:

  1. To demonstrate how digital currency-based transfers to partners can provide significant improvements in time and cost efficiencies compared to current processes.
  2. To improve transparency of the flow of funds to ensure that transfers reach recipients (i.e. local partners) safely and easily.

In the pilot, the Project Lydian platform used blockchain technology to streamline and secure the transfer of funds in a conflict zone. Built on the Polygon blockchain and using the stablecoin USDC, it provided an efficient, transparent, and low-cost way to move aid funds.

Image credit: Mercy Corps Ventures

Insights

Transforming the traditional aid model

The traditional aid model often involves multiple intermediaries, which results in delays, inefficiencies, and increased costs. This pilot demonstrated how digital currency platforms can streamline processes, reducing barriers to create a more direct and efficient aid delivery system. This reduction of intermediaries not only minimizes administrative overheads but also ensures a more efficient and direct flow of resources.

Accelerating aid delivery

Digital currency transfers took a median of 4 days, reducing transfer time by 62% compared to traditional methods, which took 10.5 days. The pilot revealed how faster aid delivery can improve response efficiency in time-sensitive humanitarian operations.

Maximizing impact with lower costs

The pilot achieved an average cost savings of 10.87% compared to traditional financial service providers (FSPs), driven by lower service fees and more favorable exchange rates. Additionally, the pilot enabled programs to reach 12.19% more households than those using traditional FSPs, expanding the reach of humanitarian aid, and ensuring that more resources directly benefit those in need.

Ensuring transparency and security

Blockchain’s technology enhances transparency and security through smart contracts. The platform provided real-time tracking of funds and a clear chain of custody, from transfer to off-ramp, enhancing transparency and security and reducing counterparty risks compared to existing processes. The technology’s capability to establish decentralized identity systems provided a secure method for transferring digital assets, providing enhanced privacy and reducing reliance on traditional banking systems..

Positive user experience

Pilot participants reported a high level of confidence in using the platform to receive and hold digital currency in their digital wallets. They also appreciated its ability to enhance privacy, minimize risk and offer greater control over their financial transactions.

Headquarters and the Country Office have expressed willingness to move forward with digital currency transfers due to the pilot’s demonstration of improved transparency and time and cost-effectiveness.

Challenges

While cryptocurrency offers a revolutionary approach to aid delivery, challenges such as scalability, regulatory uncertainties, and user literacy remain.

The pilot revealed that the challenges in the cash-out process were primarily due to issues related to agent management and communication. The tech partner is actively working to improve oversight to fix this. The technology itself, on the other hand, functioned very effectively. These insights provide a valuable basis for refining the implementation model, including better cash agent training, communication protocols, and on-ground security measures. With further development and support, these improvements will ensure safer, more reliable access for beneficiaries. Overall, this also points to the iterative process needed to scale up approaches that are piloted — scale up is not instantaneous, and requires time, effort and resources.

As the main challenges during the pilot arose during off-ramping, (i.e., converting stablecoins to local currency) actors should consider implementing a clear operational plan defining roles, responsibilities, and communication channels for all stakeholders involved in the process. This will address concerns around diffused responsibility and improve accountability across all actors.

Project Lydian is now working on expanding and train their network of cash agents in digital currency processes and effective communication. The Lydian team also remains open to integrating partners’ trusted agents. This will help build confidence and address partners’ security concerns in high-risk areas. At both the country and HQ levels, the use and literacy of digital currencies remain relatively new. The introduction of specific training and upskilling actions to improve understanding around the use, transfer, and management of digital assets are essential for the successful implementation and adoption of blockchain solutions in aid delivery.

Image credit: Mercy Corps Ventures

Recommendations & Next Steps

The scalability of this modality hinges on the ease of off-ramping funds at the field level. Moving forward, the Project Lydian team should focus on taking ownership of off-ramping funds to accommodate the growing demands of humanitarian aid and frictionless disbursement. Additionally, aid agencies and the wider aid delivery community should implement a robust monitoring and evaluation (M&E) framework to continuously assess operational efficiency, effectiveness, and equity as they scale up.

To support the continued success and scalability of digital currency transfers in restricted environments, donors are encouraged to:

  • Recognize digital currency as a viable tool for humanitarian fund transfers in restrictive environments with clear benefits in terms of discretion, time and cost savings, and improved transparency.
  • Develop flexible grant compliance to accommodate digital currency transfers, enhancing program flexibility and efficiency.
  • Support research into these approaches, incremental expansion, and scaling up to improve processes and build the evidence base around benefits and risks.
  • Fund additional pilot phases and research to validate findings across diverse contexts.

The overall pilot results demonstrated significant potential for improving the efficiency, security, and transparency of fund transfers. While blockchain holds immense promise for humanitarian aid, challenges such as scalability, regulatory frameworks, and technological literacy persist. However, with refinement, this system could offer a valuable tool that saves time and cost for aid actors operating in complex financial landscapes.

Future implementations should focus on incrementally scaling up in strategic locations and addressing the identified challenges while building on the successes observed, particularly in regions with established off-ramping relationships and favorable operating conditions.

Image credit: Project Lydian

Stay tuned for updates, evidence, and insights on our other Humanitarian Venture Lab pilots responsibly designing and testing the deployment of blockchain and crypto in humanitarian settings to improve aid delivery.

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Mercy Corps Ventures
Mercy Corps Ventures

Published in Mercy Corps Ventures

We invest in and fuel high-impact enterprises that increase the resilience of people and communities in frontier markets.

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